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BUS-121 Spring 2017 Financial Planning with Name:

Instructor: Frank Caperino Life Insurance Chap 10 Assignments / Notes

Chapter Assignments: (10 points)

Pages 325-326: Optional: Problems 1, 2, 3

Page 327: Optional: Case in Point 1, 2

Your Personal Financial Plan: Optional: Sheet 33, Sheet 34

Required: Life Insurance Assignment Sheet

Due: Monday, May 8, 2017

Chapter Sections:

What is Life Insurance?

Types of Life Insurance Companies and Policies

Selecting Provisions and Buying Life Insurance

Financial Planning with Annuities

Chapter Terms:

life insurance (a.k.a. financial protection for dependents, income replacement insurance)

stock life insurance companies versus mutual life insurance companies

nonparticipating life insurance policy versus participating life insurance policy – (Example: TIAA-CREF)

policy dividends (not really dividends in the investment sense – you don’t pay taxes on them)

Never Buy Life Insurance For A Child!

Rule of Thumb: 7 to 10 years annual gross income – get out those financial statements!

Easy Method

DINK Method

Nonworking Spouse Method

Family Need Method

The Wealthy Barber Method (described in the presentation and the assignment sheet)

term insurance – The ONLY type of life insurance! And the ONLY type you should ever buy! Our HERO! temporary life insurance – pejorative name for term insurance given by life insurance salespeople

whole life insurance (a.k.a. straight life, cash-value life, ordinary, etc.) – The Villain of our Story! Boo! Hiss! cash value (a.k.a. cash surrender value)

“forced savings” – pretzel logic that life insurance salespeople use to get you to buy whole life

“Buy term and invest the difference” – sound logic, great wisdom, and sage advice from The Wealthy Barber

limited payment policy

single payment policy

variable life insurance, universal life insurance, adjustable life insurance – yet even more types of whole life

group life insurance

credit life insurance

accidental death benefit – double indemnity (Not great ideas as you don’t care how a person dies!)

suicide clause

misstatement of age provision

accelerated benefits, viatical settlements – for the terminally ill

policy loan provision

premiums paid from cash value

return of principal provision for term life policies – becoming popular again

second-to-die life insurance policy – often used as an estate planning tool

beneficiary

lump-sum versus limited installments versus life income option – Choose the first no matter what they say! switching policies – Okay if term life. Bad idea if whole life! (Don’t ever buy a whole life policy in the first place!)

annuity – fixed annuity versus variable annuity (discussed in more detail in chapter 11 – belongs with investments)

Be sure to explain why you need or

why you do not need life insurance!

  • Due: Monday, May 8, 2017
  • Chapter Terms: